a. Gerrard Construction Co. is an excavation contractor, and has invested substantially all of its resources in property, plant, and equipment (i.e., heavy, earth-moving machinery).  Not surprisingly, depreciation expense is material in amount.  The owners of the firm would be interested in knowing what the approximate “economic” cost of fixed asset utilization is, because a substantial portion of the firm’s profits will need to be invested in replacement machinery and equipment.  Another reason for separating depreciation expense from other operating expenses is that depreciation does not result in a cash outflow.  Yes, depreciation is a “cost” of doing business; although cash is not affected by the depreciation adjustment, the wear and tear of long-term assets results in a loss of their economic value.